My personal blog about international trade, public policy & politics, pop culture, and stuff that probably interests only me

Tuesday, February 28, 2012

New Op-Ed: "How our 'do nothing' Congress can help US-China trade relations' (and quick analysis of the new CVD-NME bill)

The Daily Caller published a new op-ed of mine on the "CVD-NME" issue that I've been discussing over the last few weeks. The op-ed is essentially the Cliff's Notes version of my many previous blog posts explaining why legislation amending the US countervailing duty law to expressly apply to non-market economies (and to retroactively apply to existing CVD orders and investigations of NME imports) is a truly horrendous idea and not nearly as urgent or necessary as the White House would have us believe.

A draft of that legislation and a summary of it were released today, and it's just as bad as expected. (I particularly like the typos and mangled grammar in the summary.) I plan to blog more on the bill later, but for now I'll just say that it appears to go out of its way to stick it to the foreign exporters and US companies who are caught up in this huge mess. For example, the bill applies retroactively to all CVD investigations/orders that were conducted without lawful authority, but only prospectively allows Commerce to consider "double counting." And on the latter issue, the legislation places a likely-impossible burden on foreign exporters to prove that double counting exists, and provides no direction as to how Commerce would re-calculate duties - a task that Commerce has repeatedly admitted could be downright impossible. In short, the bill is the absolute worst of all worlds, and Commerce doesn't have to lift a finger as a result, even though multiple US courts and the WTO have ruled that the agency's actions were blatantly illegal. (Gee, it's almost as if the domestic petitioners who benefit from CVDs and double counting wrote the bill or something.)

So let's hear it for the Rule of Law! Sigh.

But regardless of how awful the draft bill is (and trust me, it is awful), its release means that my new op-ed couldn't be more timely, especially because I basically predicted the legislation's awfulness. Here's a snippet:

Congress will soon consider legislation to fix a pillar of the president’s China trade policy that has been ruled illegal by federal courts and the World Trade Organization. The bill’s passage will please the White House and the domestic industries and unions that have used the policy to deter foreign competition, but it will do little to solve the underlying flaws in the administration’s approach to China trade. Fortunately, there is a better way forward, and it simply requires Congress to do what it does best: nothing....

Congress is expected to rescue the president, but the “fix” will create far more problems than it solves. First, retroactive application of the revised CVD law to existing orders will cause a legal firestorm, as aggrieved parties sue to recover the millions of dollars in duties that, prior to 2012, the U.S. government had no lawful authority to collect.

Second, the legislative fix will do nothing to resolve the underlying problems with the administration’s current policy. The U.S. Court of International Trade and the WTO’s Appellate Body have ruled that combined duties on NME products are artificially high because alleged subsidies are offset twice — once in the CVD calculation and again in the dumping calculation. Legislation will not solve this “double counting” problem, and Commerce itself has admitted that a proper solution could be impossible. Chinese and Vietnamese imports will thus continue to be unfairly penalized, leading to more disputes and exposing U.S. exports to WTO-sanctioned retaliation.

Third, the policy will irritate U.S.-China trade relations and keep the United States on the defensive in bilateral negotiations. The administration has many legitimate complaints against distortive Chinese trade practices, but the CVD/NME issue — and the United States’ refusal to comply with adverse court and WTO rulings — undermines those concerns.

Congress should not help President Obama continue down this tortuous road. By doing nothing, it can force the administration to make the choice that should have been made years ago: either stop imposing CVDs on NME imports and thus return to the previous policy of addressing Chinese and Vietnamese subsidies through anti-dumping measures, or designate both countries “market economies” and address their subsidies via the normal CVD process.

I then go on to explain why both of these options are better than the administration's chosen approach. Be sure to read the whole thing here and then go share it with your local congressman or senator (if, you know, they'd ever return your phone calls).